The current market price of a company’s equity share is ₹ 90 and the expected dividend per share is ₹…
The shareholders' required rate of return is 13%. The constant-growth dividend model gives the dividend yield plus growth: 4.50/90 + 0.08 = 0.05 + 0.08 = 0.13.
Choose your answer
The current market price of a company’s equity share is ₹ 90 and the expected dividend per share is ₹ 4·50. If the dividend is expected to grow at a constant rate of 8%, the shareholders’ required rate of return will be
Answer and explanation
Correct answer D
The shareholders' required rate of return is 13%. The constant-growth dividend model gives the dividend yield plus growth: 4.50/90 + 0.08 = 0.05 + 0.08 = 0.13.
Practice for these exams
-
West Bengal SET (WB SET)